Construction Contracts (England) Exclusion Order 2011

Lord Young of Norwood Green Excerpts

Wednesday 7th September 2011 Grand Committee

[Lord Razzall]

The two orders are being taken together. I am entirely happy with the first one, which seems to be a very sensible tidying-up of the situation. On the second one, which basically deals with PFI, I am sure that the Minister will be aware that PFI is a highly controversial topic at the moment, not only with Private Eye but with House of Commons committees. It would not be beyond the wit of man if, as we speak, HM Treasury was looking at the details of PFI to see how it could be improved.

PFI contracts normally contain three elements: the management of the project, the finance and the construction. One of the issues here is that the construction element is to some extent being brought into the financing, and the arguments for this order go to how PFI contracts are financed. I am happy to support the order, but it would be helpful if the Minister could assure us that when HM Treasury completes its review of existing PFI contracts and the future procedures for PFI, this will be on the table again so that, if it is necessary as a result of that exercise to look again at this issue, that will be done. This does not have to be the end of the story. It may well be that that is not necessary, but if there is currently a review—not only by Private Eye, as I say, but by a more salubrious body—this should still be on the agenda if necessary.

[Lord Young of Norwood Green]

My Lords, I welcome the comprehensive statement read by the Minister. We do not see this as a matter of controversy; its origins lie before the 1997 election and it continued until the 2009 legislation. We do not see the proposals as controversial and we do not intend to oppose them. I tend to agree with the noble Lord, Lord Razzall, on PFI contracts. If I had one other comment to make, it would be to ask whether there would be an impact regarding the participation of SMEs in these contracts, something that I know the Government see as desirable. With those comments, I await the Minister’s response.

[Baroness Wilcox]

I thank noble Lords for their patience in listening to the great amount that I had to say on the order, but I felt that we could not cut it shorter because it is important stuff. Clearly, the private finance initiative is something that generates strong feelings. I have experience myself in business of a PFI contract. The noble Lords, Lord Razzall and Lord Young, have referred to PFI, but the exclusion order that we are debating today is simply a technical exercise to acknowledge the fundamental differences between private finance construction contracts and traditional construction contracts. It does not concern the wider policy landscape. I asked the same questions myself, and it does not, so I can reassure noble Lords on that. Of course, we will look at it again if circumstances change.

The noble Lord, Lord Young, mentioned SMEs. Measures to help SMEs by promoting cash and simplifying dispute resolution are under consideration anyway, as the noble Lord would have expected. As he rightly said, the Government are very concerned about SMEs and their future. I thank both noble Lords very much for their interventions; I am grateful. I hope that I have dealt with the key points that they made and I commend the order to the Committee.